As Lorne over at Politics and Its Discontents noted yesterday, there has been much gnashing of teeth as the Canadian dollar has slid down to 90 cents (U.S.) But Tom Walkom writes this morning that the dollar can and should fall farther:
With luck, it will end back up at roughly 80 cents. Under the purchasing power parity rule, which compares the prices charged for identical goods in two countries, that’s about where it should be.
The rise of the dollar was predicated on the prime minister's ambition to turn Canada into a petro state and himself into a blue eyed sheik. But that dream is beginning to crumble:
There are more fundamental reasons behind the dollar’s decline. One is that commodity prices are easing world-wide – which means there is less demand for the currencies of countries, like Canada, that export natural resources.
Another is that the U.S. dollar is rising – largely because traders expect that country’s central bank, the Federal Reserve, to hike interest rates. (So-called hot money tends to flow into whichever country offers the highest yield).
Mr. Harper's dream of building a Canadian economy on a 19th century strategy simply isn't succeeding. And no matter how many loonies he spends on advertising, trying to convince Canadians that sound economic management depends on sending bitumen to foreign markets, it's clear that the game is up.
Mr. Harper is a failed economist.